Views on Motherson Sumi Systems Result Review- Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst – Auto & Auto Ancillary, Angel Broking) on Motherson Sumi Systems Result Review:

"Motherson Sumi Systems (MSS) recorded strong 3QFY2014 results driven by robust performance at the Samvardhana Motherson Reflectec (SMR) and Samvardhana Motherson Peguform (SMP) front. SMP turned profitable during the quarter recording a net profit of Rs 29cr (against a loss of Rs 49cr in 2QFY2014) while EBITDA margins at SMR touched double digit levels (sharp expansion of 130bp qoq to 10.1%) leading to a record net profit of Rs 59cr. On the standalone front, however, the company reported sluggish results due to slowdown in the top-line growth and margin pressures.

For 3QFY2014, consolidated revenues grew strongly by 19.9% yoy (10.3% qoq) to Rs 7,989cr, ahead of our estimates of Rs 7,610cr, on the back of the strong growth in SMR and SMP revenues. The revenues at SMR and SMP grew at a robust rate of 30.2% (12.8% qoq) and 22.8% yoy (13.2% qoq) respectively driven by execution of new orders coupled with the favorable currency movement. The standalone entity though posted a modest 3.9% yoy (flat qoq) growth in the top-line due to the slowdown in the domestic markets. At the consolidated level, while the India revenues grew by 2.5% yoy (down 1.5% qoq); overseas revenues grew by 24.2% yoy (12.4% qoq) during the quarter. On the operating front, consolidated margins stood flat sequentially at 9.6% (up strongly by 195bp yoy), broadly in-line with our estimates of 9.9%, driven by improving capacity utilization levels at SMR and SMP. While raw-material cost pressures were witnessed during the quarter, continuous ramp-up at the new facilities mitigated the impact on the margins. While, SMR margins witnessed a sharp improvement of 130bp qoq to 10.1%, standalone margins contracted 170bp to 19% primarily due to commodity cost pressures. SMP margins remained flat sequentially at 5.9% during the quarter. Led by a strong operating performance, adjusted consolidated bottom-line increased by a strong 33.5% yoy to Rs 223cr. We retain out positive view on the company as it continues to report sharp improvement in its operating performance, driven by its strategy of increasing the content per car, improvement in utilization levels at the new plants and profitability improvement measures at SMP. Our rating and target price, however, is currently under review."

Source : Equity Bulls

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